“By far, the fastest growing demographics for housing is coming from upper-income groups,” he said. There has been a significant increase in household formation since summer 2020 as high-income Americans have continued to see their wealth increase, said Parsons, head of economics and industry principals for RealPage Inc., a real estate technology firm.

Rents in coastal cities hard-hit by the pandemic, like New York City, have started to recover while rents have remained high in Sun Belt cities, suggesting that pandemic migration trends aren’t reversing, Parsons said.

“There’s a contingent of upper-income households that don’t want to be pinned down,” he said.

Real estate investor Eric Martel made a big business and lifestyle change in 2018, when he sold his house in the San Francisco area and moved into a luxury apartment rental in downtown Los Angeles.

He used proceeds from the sale to help fund his single-family rental homes venture, MartelTurnkey, which buys, renovates and sells single-family homes to investors. The company, which Martel runs with his wife and two adult sons, started out in 2016 by acquiring single-family rental homes and leasing them directly. Now, the firm has pivoted to selling homes as investment properties, and helps new landlords get financing and find a tenant, Martel said. It also connects investors to property-management services for the homes that they buy.

“It’s more profitable right now for us to be flipping the houses, selling these rental properties to investors, than for us to keep the single-family rentals ourselves,” he said. The company currently has about 140 deals in progress and expects to sell 180 properties this year, compared to 120 last year, Martel said.

It may get marginally more expensive for individual buyers to acquire houses, as the Federal Reserve is expected to start raising interest rates to cool off the economy, which would translate into higher mortgage rates. Meanwhile, institutional investors looking to expand their stable of rental housing can pay cash.

Still, RealPage’s Parsons isn’t sure that they’re going to change the face of the market any time soon. For one, it’s much easier to buy and build 300 apartment units than 300 single-family houses, he said.

The institutional segment of the rental housing market is still small; 77% of rental homes are owned by individuals while institutional investors have 1.8% of the market, according to the National Rental Home Council.

“You can’t achieve scale as quickly,” he said. “I don’t think you’re ever going to see institutions represent a majority of the market.”